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Court of Appeal refuses to lift Litigation Privilege over Without Prejudice Settlement Correspondence

In an important judgment, the Irish Court of Appeal recently gave judgment in the case of John Stanley Purcell v Central Bank of Ireland, the Attorney General and Ireland1, upholding a High Court decision of Mr Justice Hedigan in which he refused to order discovery of certain without prejudice correspondence passing between the Central Bank and Irish Nationwide Building Society (“INBS”). The without prejudice correspondence at issue had preceded the settlement of a Central Bank administrative inquiry into INBS. The judgment is an important one in that it reiterates the circumstances in which the Court may sanction the lifting of litigation privilege particularly in circumstances where the privileged documents in question have been exchanged in the context of settlement negotiations.

Background

Shortly after concluding the settlement of its administrative inquiry into INBS, the Central Bank made public, by way of press release, the details of its settlement. In the press release the Central Bank also confirmed that a separate administrative sanctions inquiry would continue against certain persons, of whom the plaintiff was one.

The plaintiff brought two related sets of High Court proceedings challenging (1) the validity of the decision, by the Central Bank, to hold the proposed inquiry against the plaintiff pursuant to Part IIIC of the Central Bank Act 1942 (as amended) and (2) challenging the constitutionality of the Central Bank’s administrative sanctions procedure. The plaintiff also contended that his constitutional right to a good name was infringed by the manner in which the terms of the settlement with INBS had been published by the Central Bank.

In the context of these High Court challenges, the plaintiff sought discovery from the Central Bank of the without prejudice correspondence with INBS, disclosure of which the Central Bank withheld on the grounds of privilege.

Mr Justice Hedigan of the High Court refused to order discovery of the without prejudice correspondence. The plaintiff appealed this decision and the Court of Appeal upheld that refusal.

Analysis

Mr Justice Hogan of the Court of Appeal recognised that if parties could not pursue settlement avenues on a without prejudice basis, without fear of such correspondence being used against them, the potential for settlement would be greatly undermined. He concluded that litigation privilege attached to documents, including correspondence, exchanged in contemplation of settlement and confirmed that very compelling reasons would be required in order to displace a claim to litigation privilege.

Citing the Supreme Court decision in Ryan v Connolly2, which sets out the circumstances in which the Court could – or should – sanction the lifting of litigation privilege, Mr Justice Hogan noted that “the court is entitled to look at the ‘without prejudice’ correspondence for the purpose of determining whether the circumstances were such that the defendants should not be allowed to maintain their plea”. The Court in Ryan recognised that it would be highly damaging to the administration of justice if the plaintiff was not permitted to go behind the without prejudice correspondence in circumstances where the privilege had been abused by the other party.

In this case, however, there was no question that the Central Bank had abused the privilege in this manner – the substance of the without prejudice communications was not in issue and the question concerned only whether the litigation privilege had been properly claimed by the Central Bank.

The Court also noted that the terms of the Settlement Agreement were not relevant to the prosecution or defence of the Central Bank’s inquiry concerning the plaintiff. Although the present management of INBS acknowledged, as part of settlement, that there were “multiple failings” on the part of the Society, “this could have no probative valuewhateverso far as the Central Bank’s case under the administrative sanctions procedure against Mr Purcell is concerned”.

The Court also rejected the plaintiff ’s contention that the Central Bank’s press release, which set out the salient facts of its settlement with INBS, caused the privilege to be waived. Citing, by way of example, the decision of the High Court of England in the LIBOR litigation, Property Alliance Group Limited v Royal Bank of Scotland3,

Mr Justice Hogan held that, unlike the conclusions of the High Court in Property Alliance Group, disclosure in this instance did not extend beyond a “mere mention” of the terms of the settlement and the Central Bank had neither put the terms of the INBS settlement in issue nor sought to rely on those terms adversely against the plaintiff.

It is also worth noting that the Court of Appeal, despite an offer from the Central Bank’s Senior Counsel, declined to exercise its discretion to inspect the without prejudice documents. This decision serves as a useful reminder as to the absolute nature of litigation privilege, the court’s reluctance to sanction any lifting of that privilege save in exceptional circumstances and the relatively high bar a party must clear to successfully argue that privilege has been waived.

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